5 Financial Resolutions for a Happy and Successful 2024

Welcome back, everyone. Peter, it is very good to see you.

Happy New Year. We are, of course, sharing five financial resolutions for a happy and successful 2024. We are revisiting this. This is our annual fan favorite, but we have new action steps you can take now to set yourself up for success. So again, today we are sharing five resolutions for 2024. And the first resolution is meet your match, or as my dad calls it, don't leave free money.

Yeah, absolutely. And the term free money I use very loosely because it's not free. You are working the same amount, whether you get that extra part of your compensation or not.

So it's not free. You're working for it regardless. It's just that if you don't put any skin in the game, so to speak, if you don't make those 401k contributions, then your company gets to keep that part of your salary and your compensation. Whereas if you do, if you put that money away, sort of actually keeping that part of your salary and your compensation.

If you put that money away, sort of act like you didn't even earn it and put it in the envelope and send it to your future retired self, who will thank you for it, you get an extra component of your compensation. Don't ever leave the match on the table because there's really nowhere else in the financial world that you can guarantee yourself that kind of immediate return on your investment. If it's 10 cents on the dollar, you can't guarantee that kind of return anywhere else. But most companies are matching dollar per dollar or 50 cents on the dollar up to a certain percentage.

And you will again absolutely thank yourself later for putting that money away today. Oh, by the way, it's also not free because the company when they match, they're nice enough to offer you that match, but they're not generally nice enough to pay your taxes on their dollars for you. So you will have a cost in retirement. You do need to understand that about the 401k and the 401k match as well. Right. Definitely an important consideration.

All right. Second, contribute more to retirement, your retirement accounts. But I wanted to know, Peter, what's a good percentage that we should be saving for retirement? And then, of course, we should also contribute more to those Roth accounts as you talk about taxes. What percentage should be tax deferred versus tax free? Well, I mean, you've got to crunch the numbers and make sure that you are projecting out to retirement and that it makes sense for you that you will assume that you are in a similar kind of tax situation when you do retire. Or if you are going to dramatically change tax brackets and situations somehow that you understand that.

But as long as you've done that and you have some realistic expectations of the income that you will generate for yourself in retirement, then my answer to the Roth question is as much as possible. I think it's easier to pay your taxes with your paycheck than it is out of the finite amount of money that you have to last an unknown amount of time in retirement. And so if you've got a part of or a majority of your savings that is tax free, again, you will thank yourself later for having paid that bill up front. And by the way, we know what taxes are today.

We do not know exactly what they're going to be into the future. But if you defer and delay paying taxes, you leave yourself subject to those potential tax changes and possibly increases. Now, how much should we be saving? You know, if you've got a 30 year career and you theoretically save 10 percent of your income each year by the end of that 30 year career, let's let's imagine you earned the same amount for for every year, which doesn't happen.

But if you did, by the end of those 30 years at 10 percent, you have only saved three years worth of the income that you are used to earning. Now, over that 30 year career, we would hope to get investment returns and double it and double it and double it again. But retirement is very long and very expensive and it's in the future.

So it's more expensive than it is today. So bottom line, we need to be saving as much as possible because the burden of retirement is more and more on our own shoulders. And we need to have a well funded retirement. We need to be doing as much as possible. The target goal, really the benchmark in my mind of what we should be doing is 15 percent. OK. Yeah, we hear 10 percent a lot, but that certainly doesn't sound like the math adds up. So next you say create a budget. And this is always on my resolutions, Peter.

Sometimes it doesn't get done, though. Yeah, nobody likes the thought of budgeting because it feels limiting. Right. Oh, I can't buy this.

I can't do that. I can't spend on the things that I want to spend on. In reality, the budget is giving yourself a target and hopefully freedom to spend within a reasonable range, keeping it between the ditches, so to speak.

Right. Is is that we know that we've got to spend at least this much. That's kind of subsistence.

That's our bare essentials. But we don't want to go absolutely crazy and hog wild and be spending frivolously either. So somewhere in between our bare essentials and some amount of enjoyable lifestyle, we have to understand what that costs us. And that is the process of budgeting. And especially if we are looking into the future and trying to plan for retirement, understanding your budget is essential. We've got to be aiming for the right target if we think we only spend four thousand dollars a month. And in reality, we're spending closer to eight thousand dollars a month today. Our retirement projections could be way off the mark.

We could be aiming for the complete wrong thing. So we've got to understand the budget while we're working, aim for a retirement target. And in retirement, it's important to stick within a budget as well, because, again, we've got a finite amount of money, that pile of money.

We're not adding and contributing to it any longer. And we've got to make it last for an unknown amount of time. And the only way to do that is through controlling spending. That's your best retirement asset for confidence. And when you've done number three, then you can move on to resolution number four, which is build an emergency fund.

Yeah. And that should be three to six months worth of those living expenses. So going back to the budget, you've first got to understand what your monthly living expenses are in order to then have a properly and well-funded emergency account.

Now, three to six months is not the range for a minimum. That is a minimum and a maximum threshold for an appropriate emergency account. And an emergency account's job is to do nothing other than sit there and wait for an emergency to happen.

Life happens. Inconveniences arise. You need to be able to stroke a check or, you know, pay that. And that takes an emergency and turns it into an inconvenience. If you don't have that fund there, if you don't have those dollars waiting, then it can take an inconvenience and turn it into an emergency or debt. But you don't want to have too much in that emergency account because generally banks don't offer us a lot of growth.

Yes, interest rates are a little better than they were two years ago, but in reality, if we keep excess cash just sitting in bank accounts and even these, you know, high-yield savings accounts, ultimately, over time, you will be losing money to inflation and losing your opportunity cost of what you could be making in reasonable investments. And last, resolution number five, ensure yourself building an emergency fund, of course, a great first step. But ensuring yourself means that not only you, but your family will also be okay in case the worst happens. Yeah, right.

Yeah. The emergency account is for those small inconveniences, but three to six months is not going to cover a catastrophic loss, a loss of income, a loss of a spouse. You know, what impact would that have on your family for years to come? So we've got to have insurance in place. And I'm a big fan of term life insurance, especially during our working career. It is very affordable, very inexpensive to leverage a large amount of death benefits should that worst possible scenario happen. And then with the difference, you can invest that and hopefully by, you know, 20 to 30 years in the future, you've built up a good nest egg for yourself. But at any point in time, you've also got to answer the question, what would happen and how long could I survive if my paycheck stopped today?

So short term disability, long term disability, long term care insurance, like at different stages. There are different ways that we need to address this question of insuring ourselves in the protections that we have in place for those catastrophic worst case scenarios. Peter, I love this conversation.

I look forward to it every year. I feel like these action steps are very doable. Some might require a conversation with a professional. So if somebody has questions about it, what's the best way to get a hold of you? Yeah, you can reach me at Roshan planning nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six or online.

It looks like rich on planning dot com. It's my last name, Roshan Roshan planning dot com. And I always appreciate the time, Aaron.

It's one of my favorite topics as well. All right. Happy New Year, Peter. Thank you. Happy New Year.

Everyone here, Roshan here. Hope you enjoy the content. As always, make sure that you like subscribe, share the videos with others that may find this information helpful. And as always, you're welcome to be in touch or to submit questions or comments. You can comment below the video anything that you'd like to see or hear shared on our YouTube channel. And in future videos, if you've got a topic that you've been thinking about or is of concern for you financially, be sure to let us know. We'd love to help you by discussing it on the channel. So appreciate the continued views and the likes and the subscribes, the shares, the comments always helpful. We look forward to getting you the information that you need.

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